If you’re thinking about selling your life insurance policy, it’s important to know if it’s term or permanent. This difference can greatly affect the profit potential in a life settlement.
A term life insurance policy offers coverage for a set period, usually 10, 20, or 30 years. After this period, the policy expires unless converted to a permanent policy. Investors may be less interested in term policies since the death benefit isn’t guaranteed if the insured outlives the term. Additionally, term policies often have lower premiums, making them appealing for short-term needs but less attractive for investment.
In contrast, a permanent life insurance policy covers the insured’s entire lifetime. These policies typically have higher premiums but build cash value over time, which can be used for future premiums or borrowed against. Permanent policies, such as whole life, universal life, and variable life, serve as financial assets with a guaranteed death benefit and potential cash value growth. Investors may find permanent policies more appealing due to these features.
Term life insurance lacks a savings feature, so there’s no cash value at the end. You can’t cash out, borrow, or withdraw funds from term life insurance, making it purely protective without an investment component, which may not suit those seeking more than death benefit coverage.
